Key Concepts Of Blockchain

Remember how you used to organise group parties? Making individual contributions and finalising a place through discussion among the group, reaching a consensus.?

Apply this to millions of people rather than a group, and use it for validating transactions rather than parties and you got yourself a digital network running on Blockchain.?

Essentially, Blockchain is a combination of 5 major concepts which allow the creation of a fair digital world. Let's look at these concepts:

1. Consensus algorithm: As the heart of a Blockchain network, Consensus algorithm is responsible for reaching a mutual decision among the network participants. The decision can represent anything from a simple transaction to any data entry on the Blockchain. Proof of work and Proof of stake are the widely used consensus algorithms.?

2. Distributed ledger: Ensuring that the digital ecosystem is robust, the Blockchain network participants share a copy of a ledger containing all transactional information. Even the smallest action on the network is recorded in the ledger and then distributed to all participants.

3. Decentralised: No one owns the Blockchain network but rather every participant who maintains the distributed ledger becomes a key component of the network. The whole ecosystem works on a majority rule wherein if the majority agrees to any change or modification, the network accepts it, creating a true democratic environment.?

4. Encryption: As a unique value addition, the use of hashing algorithms and various encryption methods allows the Blockchain network to provide anonymity to the people. Through concepts like public key and private key, users can access their data without revealing their identity. Further, hashing is used in such a way that the decentralised ledger becomes immutable.

4. Smart contracts: Smart contracts are instructions embedded in a code which streamline the execution of any task or transaction. Smart contracts eradicate the need for intermediaries or third party services like escrow as the predefined conditions in the form of written code are used to govern digital interactions.